Delaware Investments Delaware Investments Delaware Investments

Delaware Core Plus Bond Fund

Objective

Delaware Core Plus Bond Fund seeks maximum long-term total return, consistent with reasonable risk.

Strategy

The Fund invests at least 50% of its net assets in domestic (U.S.) investment grade debt securities. The Fund may also invest up to 30% of its net assets in high yield securities and up to 30% of its net assets in foreign securities.

Fund information
Inception date08/16/1985
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDEGGX
CUSIP246094205
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
CheckwritingNo
Payroll DeductionYes
IRAsYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return

as of month-end (12/31/2016)

as of quarter-end (12/31/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.29%2.29%2.43%2.30%4.86%5.87%08/16/1985
Max offer price-2.32%-2.32%0.88%1.36%4.38%5.71%
Bloomberg Barclays U.S. Aggregate Index2.65%2.65%3.03%2.23%4.34%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-2.70%2.29%2.43%2.30%4.86%5.87%08/16/1985
Max offer price-7.07%-2.32%0.88%1.36%4.38%5.71%
Bloomberg Barclays U.S. Aggregate Index-2.98%2.65%3.03%2.23%4.34%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 4.50% and are subject to an annual distribution fee.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Expense ratio
Gross1.21%
Net0.90%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Nov. 28, 2016 through Nov. 28, 2017. Please see the fee table in the Fund's prospectus for more information. The Fund's Class A shares are subject to a blended 12b-1 fee of 0.10% on all shares acquired prior to June 1, 1992 and 0.25% on all shares acquired on or after June 1, 1992. All Class A shares currently bear 12b-1 fees at the same rate, the blended rate based on the formula described above. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Fund's Board of Trustees.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20162.26%2.15%0.65%-2.70%2.29%
20151.88%-1.77%0.42%-1.03%-0.53%
20142.39%2.37%-0.28%1.05%5.63%
20130.25%-3.17%0.43%1.01%-1.53%
20120.43%2.49%2.35%0.51%5.89%
20110.95%2.31%2.30%1.74%7.49%
20102.87%2.36%3.46%-0.96%7.88%
20090.32%7.93%8.30%2.14%19.75%
20081.53%-0.97%-3.49%1.35%-1.65%
20071.13%-0.73%2.30%2.29%5.06%
2006-1.26%-0.33%4.05%0.60%3.01%
Portfolio characteristics - as of 12/31/2016Bloomberg Barclays U.S. Aggregate Index
Number of holdings77110,069
Number of credit issuers268
Portfolio turnover (last fiscal year)316%n/a
Effective duration (weighted average) (view definition)5.34 years5.89 years
Effective maturity (weighted average) (view definition)8.01 years8.19 years
Yield to maturity (view definition)3.58%2.61%
Average market price (view definition)$103.64$102.70
Average coupon (view definition)4.11%3.08%
Yield to worst (view definition)3.56%2.61%
SEC 30-day yield with waiver (view definition)2.46%
SEC 30-day yield without waiver (view definition)2.14%
Annualized standard deviation, 3 years (view definition)3.00n/a
Portfolio composition as of 12/31/2016Total may not equal 100% due to rounding.
Credits59.5%
Mortgage-backed securities28.7%
Asset-backed securities6.9%
U.S. government securities4.6%
Municipal bonds0.3%
Top 10 fixed income holdings as of 12/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
FNCL 3 1/172.0%
FNR 2011-80 CB1.8%
United States Treasury Inflation Indexed Bonds 0.125 4/15/20191.1%
FN AL75870.9%
Bank of America Corp. 4.450 3/3/20260.8%
Credit Suisse Group Funding Guernsey Ltd. 4.550 4/17/20260.8%
FN 9323870.7%
Anheuser-Busch InBev Finance Inc. 3.650 2/1/20260.7%
FN AL69190.5%
JPMorgan Chase & Co. 4.250 10/1/20270.5%
Total % Portfolio in Top 10 holdings9.8%

Fixed income sectors as of 12/31/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Investment grade credits41.0%31.2%
MBS and CMOs21.1%28.2%
High yield credits14.0%0.0%
Commercial mortgage-backed securities7.6%1.7%
Asset-backed securities6.9%0.5%
Emerging markets4.4%0.0%
Treasury inflation-protected securities1.5%0.0%
Municipal bonds0.3%0.0%
International developed0.2%0.0%
U.S. treasury securities0.1%36.2%
Credit quality as of 12/31/2016
RatingFundBenchmark
AAA36.7%70.8%
AA4.6%4.8%
A13.8%10.9%
BBB29.3%13.6%
BB10.3%0.0%
B4.9%0.0%
CCC0.5%0.0%

Total may not equal 100% due to rounding. The Fund’s investment manager, Delaware Management Company (DMC), a series of Delaware Management Business Trust, receives “Credit Quality” ratings for the underlying securities held by the Fund from three “nationally recognized statistical rating organizations” (NRSROs): Standard & Poor’s Financial Services LLC (S&P), Moody’s Investors Service, and Fitch Ratings, Inc. The credit quality breakdown is calculated by DMC based on the NRSRO ratings. If two or more NRSROs have assigned a rating to a security the higher rating (lower value) is used. If only one NRSRO rates a security, that rating is used. For securities rated by an NRSRO other than S&P, that rating is converted to the equivalent S&P credit rating. Securities that are unrated by any of the three NRSROs are included in the “not rated” category when applicable. Unrated securities do not necessarily indicate low quality. More information about securities ratings is contained in the Fund’s Statement of Additional Information.

Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
Return of
capital
20160.0000.2090.000
20150.0000.2280.000
20140.0000.2290.036
20130.0000.2560.000
20120.0190.2550.000
20110.0000.2940.000
20100.0000.3370.000
20090.0000.3860.000
20080.0000.3790.000
20070.0000.3540.000
20060.0000.3190.000

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

Risk managed solutions

Roger Early, Head of Fixed Income Investments, discusses why the team’s assets under management, structure, and mindset are strengths that help distinguish it from others. [Runtime: 2:14]

Watch the video

Read video transcript

Roger Early

Roger A. Early, CPA, CFA

Executive Director, Head of Fixed Income Investments, Executive Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: May 2007

Years of industry experience: 40

(View bio)


Paul Grillo

Paul Grillo,  CFA

Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: February 1997

Years of industry experience: 35

(View bio)


Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2015

Years of industry experience: 18

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 22

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2011

Years of industry experience: 24

(View bio)


Paul Matlack

Paul A. Matlack, CFA

Senior Vice President, Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

Years of industry experience: 31

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Senior Portfolio Manager, Co-Head of Credit Research

Start date on the Fund: December 2012

Years of industry experience: 30

(View bio)


You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial intermediary, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price4.50%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.55%
Distribution and service (12b-1) fees0.25%
Other expenses0.41%
Total annual fund operating expenses1.21%
Fee waivers and expense reimbursements(0.31%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.90%

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 0.65% of the Fund's average daily net assets from Nov. 28, 2016 through Nov. 28, 2017. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund. Additionally, the Fund's Class A shares are subject to a blended 12b-1 fee of 0.10% on all shares acquired prior to June 1, 1992and 0.25% on all shares acquired on or after June 1, 1992. All Class A shares currently bear 12b1-fees at the same rate, the blended rate based on the forumula described above. This method of calculating Class A 12b-1 fees may be discontinued at the sole discretion of the Fund's Board of Trustees.

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Delaware Core Plus Bond Fund Quarterly commentary December 31, 2016

Overview

The Bloomberg Barclays U.S. Aggregate Index recorded a negative return for the fourth quarter, with higher-quality AAA bonds outperforming lower-rated investment grade credit tiers within this index on a total return basis. However, based on excess return, BBB-rated credit significantly outperformed. Although most broad-market fixed income indices produced negative returns, high yield corporate bonds were positive performers for the period.

U.S. economic indicators were generally stronger, with the Citigroup Economic Surprise Index rising to end 2016 in positive territory. Jobless claims, which have averaged about 263,000 a month for the past year, remained low while nonfarm payrolls, which have averaged about 200,000 a month since 2011, fell to about 176,000 during the quarter. On the inflation front, core personal consumption expenditures (or PCE, the Federal Reserve’s preferred inflation gauge) declined slightly to 1.6% year over year. Meanwhile, personal income and spending remained subdued, with both metrics falling over the period. Until personal and wage-and-salary income growth accelerates, consumer inflation is likely to remain muted. Notably, the National Federation of Independent Business (NFIB) Small Business Optimism Index rose following the U.S. election.

The global economy and financial markets stand at an important crossroads. As financial markets trade on unrealized expectations for faster growth, we believe it’s appropriate to question whether reality will eventually intervene. Would even the most optimistic scenario for the implementation of tax and infrastructure (that is, fiscal) policy measures make enough of an impact to offset the sizable and longstanding headwinds to global growth that are centered on aging populations, lower productivity, a massive debt overhang, and a general lack of global demand? Anything more than a slightly marginal increase in U.S. and global gross domestic product (GDP) seems unrealistic to us.

Equally important, how do investors factor in the high level of uncertainty arising from implementation-related challenges for the Trump administration? These challenges include the incoming president’s penchant for unpredictability, the extent to which he and the Congress are able to cooperate, the president-elect’s prioritization of growth-restricting global trade–related actions versus his growth-supportive fiscal plan, and the potential for any growth programs to be driven by a surge in government debt. Given current structural obstacles, it seems unlikely to us that a debt-financed plan can be a long-term positive for economic growth unless the debt-financed actions add substantively to U.S. and global productivity. History reminds us that uncertainty is generally bad for financial assets, so a measure of caution along with the current serving of hope seems appropriate, in our view.

Within the Fund

Delaware Core Plus Bond Fund (Institutional Class shares and Class A shares at net asset value) posted negative returns but outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Index, during the fourth quarter of 2016.

  • The Fund’s underweight to Treasury securities had a positive impact on relative performance as Treasury bonds underperformed the benchmark. However, our focus on intermediate to longer maturities acted as a detractor as the yield curve steepened.
  • Government-backed mortgage-backed securities (MBS) and asset-backed securities (ABS) outperformed the benchmark index during the quarter. Relative to the ABS sector, the Fund’s ABS positions outperformed given our emphasis on short-maturity and floating-rate issues.
  • Although investment grade credit performed in line with the index, our security selection negatively influenced relative performance. Specifically, the Fund’s holdings within the banking sector acted as a detractor.
  • The Fund’s allocation to high yield bonds benefited relative performance as the sector outperformed the index for the quarter. Also, the Fund’s out-of-benchmark exposure to bank loans positively influenced performance.
  • Fund positions in emerging market debt had a negative effect on relative performance as the sector underperformed many of the broader fixed income markets.
  • Non-dollar developed markets, while representing only a small allocation within the Fund, produced slightly positive results during the quarter.

Outlook

As we assess the investment outlook and develop strategy, we are focused on many of the same issues as in 2016. The effectiveness of monetary policies in the developed world appears to be declining and fiscal policy is moving to the forefront. We take a favorable view of corporate tax reform, which could lead to a more sustainable rise in economic growth rates; however, a completed bill may arrive too late to have a material impact on growth in 2017. Our credit team has detected signs that corporate fundamentals are stabilizing at a time when business outlooks are improving along with consumer confidence. Continued gains in global services and manufacturing data adds support to this thesis. We will be watching closely for a continuation of these trends.

However, we are hesitant to extrapolate the good news too far into 2017. The renewed strength in the U.S. dollar presents headwinds that are not specific to the United States but that could lead to a tightening of global financial conditions. Dollar strength will weigh on U.S. exports, which may result in weaker corporate profits. Continued strength of the dollar could also drive an increase in Chinese capital outflows during a time when China is walking an economic “high wire” in trying to balance the need for short-term growth against a worrisome long-term debt problem. Furthermore, emerging economies that have relied heavily on funding in U.S. dollars over the past several years could experience challenges.

As in late 2015, markets are currently anticipating multiple rate hikes by the Fed in the upcoming year. The Fed’s “dots” forecast of three such moves in 2017 appears to be affecting market expectations as well. A new era of Fed hikes could begin this year, but as we noted last quarter, nothing can be taken for granted in a world burdened by debt and subpar growth trends. The global search for yield will likely continue, but it may not be enough to support risk premiums for credit that are inside long-term averages. In our view, avoiding idiosyncratic risks should provide the backdrop for our active, fundamental research-based approach to help navigate these challenging times.

The NFIB Small Business Optimism Index is a survey asking small business owners a battery of questions related to their expectations for the future and their plans to hire, build inventory, borrow, and expand.p>

The Citigroup Economic Surprise Index is a rolling measure of beats and misses of indicators relative to consensus expectations.

Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the U.S. government or its agencies or instrumentalities.

Bond ratings are determined by a nationally recognized statistical rating organization.

Per Standard & Poor’s credit rating agency, bonds rated below AAA are more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories, but the obligor’s capacity to meet its financial commitment on the obligation is still strong. Bonds rated BBB exhibit adequate protection parameters, although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics, with BB indicating the least degree of speculation of the three.

[18484]

The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.

High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds.

The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.

The Fund may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivatives transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.

The Fund may experience portfolio turnover in excess of 100%, which could result in higher transaction costs and tax liability.

All third-party marks cited are the property of their respective owners.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 01/20/2017)

Class APriceNet change
NAV$8.240.01
Max offer price$8.63n/a

Total net assets (as of 12/31/2016)

$117.2 million all share classes

Overall Morningstar RatingTM

 
Class A shares (as of 12/31/2016)
Class ANo. of funds
Overall3869
3 Yrs2869
5 Yrs3759
10 Yrs4541
Morningstar categoryIntermediate-Term Bond

(View Morningstar disclosure)

Morningstar ranking (as of 12/31/2016)

YTD ranking735 / 985
1 year735 / 985
3 years599 / 869
5 years482 / 759
10 years107 / 541
Morningstar categoryIntermediate-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 12/31/2016)

YTD ranking200 / 217
1 year200 / 217
3 years139 / 191
5 years144 / 164
10 years53 / 105
Lipper classificationCore Plus Bond Funds

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays U.S. Aggregate Index (view definition)

Morningstar Intermediate-Term Bond Category (view definition)

Lipper Core Plus Bond Funds Average (view definition)

Additional information